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INT113FinalProject.pptxGuatemala
Lesbia Bonilla
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Introduction:
Guatemala:
Is a small country located in Central America, surrounded by countries like Mexico, El Salvador and Honduras along with Belize in the Northeast.
The Pacific Ocean in the south and the Caribbean Sea bordering the Gulf of Honduras.
Rationale: Guatemala is the country I have chosen for my final project. One of the reasons is that I spend five years living there and it's a country with beautiful people, culture and amazing food.
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Natural Hazards/Climate
Guatemala is tropical, hot, humid in lowlands and cooler in highlands.
Numerous volcanoes in mountains, with occasional violent earthquakes.
Caribbean coast extremely susceptible to hurricanes and other tropical storms.
Sociocultural Environment
Power Distance: Score 95
Inequalities
Unapproachable managers
Hierarchical
Patriarchal
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Sociocultural Environment
Individualism: Score 6
Collectivistic culture
Strong identity
Indirect communication, need for harmony
Avoids open conflict
Moral base is priority
Invest to stablish a trusting relationship
Indirect feedback
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Sociocultural Environment
Masculinity: Score 37
Highly driven by competition
Strong masculinity culture
Caring for others, quality of life are dominant values
Consensus is value
Sympathy for the underdog
Leisure is important
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Sociocultural Environment
Uncertainty Avoidance: Score 98
Strong in rituals
Religious
Ambiguity
Emotions are openly expressed
Extensive rules but not followed
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Sociocultural Environment
Country Composition
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Major Religion
Roman Catholic Evangelical Other Atheist None Unspecified 0.41699999999999998 0.38800000000000001 2.7E-2 1E-3 0.13800000000000001 2.9000000000000001E-2
Age Structure
0-14 years 15-24 years 25-54 years 55-64 years 65 years and over 0.33679999999999999 0.1976 0.36449999999999999 5.4100000000000002E-2 4.7E-2 0-14 years 15-24 years 25-54 years 55-64 years 65 years and over 0 0 0 0 0 0-14 years 15-24 years 25-54 years 55-64 years 65 years and over 0-14 years 15-24 years 25-54 years 55-64 years 65 years and over
Sociocultural Environment
Country Composition
| Literacy | 81.5% age 15 and over can read and write |
| Urbanization | 52.2% of total population (2021), 2.59% annual rate of change (2020-25 est.) |
| Populated cities | 2.935 million GUATEMALA CITY (capital) (2020) |
| Education | Education expenditure 3.2% of GDP 92019) |
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Major Religion
Sociocultural Environment
Language: Spanish (69.9%) Maya languages (29.7%)
Nonverbal: In a business setting man greet men with a warm shake of hands while maintaining direct eye contact with one another. Meanwhile, friends and close acquaintances share a hug and a kiss on the cheek among women.
Values and Communication
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Sociocultural Environment
In business situations Guatemalans understand the importance of arriving on time to meetings.
Business breakfast and lunches are preferred to dinners.
Guatemalans referred to their elders by their titles as a show of respect
It is a custom to interreact in social conversation before talking business.
Spend time developing a friendship before starting business negotiations.
Business Etiquette
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Sociocultural Environment: Observation Deck
Business Observations
As an act of respect, it is recommended to allow the host to begin the business discussion.
Decisions are usually from the top down and can be lengthy before they are reached.
Top executives are in charge of most of the decision-making. However, this can be a lengthy process.
Guatemalans need to build a harmonious relationship before talking business, so avoid abruptly persuasive selling, as it could create confrontation..
Guatemalans might not be direct when communicating as they respond best to indirect communication style.
Business negotiations can be slow expect to take several trips to finalize a transaction.
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Political-Legal Environment
Government Overview
| Type of Government | Democracy - |
| Political Leaders | Alejandro Giammattei, president elect |
| Political Pressure (or Opposition) Groups | PC – Citizen Prosperity PHG – Partido Humanista de Guatemala VALOR - Value |
| Current Governing Ruler | President Giammattei |
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Political-Legal Environment
Corruption
| Bribe Index | Rank: N/A Score: 28% |
| Corruption Perception Index | Rank: 149/180 Score: 25/100 |
| OECD Anti-Bribery Convention | Enforcement: Low |
| Control of Corruption | Rank: 26.92% in 2019 |
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Political-Legal Environment: Observation Deck
Business Observations
Political pressure groups are organizations set up to influence government public opinion, but they are easily created and dissolved, that has been the case with some parties represented in the last election, which are no longer exist.
Corruption report shows Guatemala with a high corruption risk. Guatemala has very low ranking of control of corruption (26.92%).
Bribes are often exchanged to obtain favorable decisions. It has been reported that business executives perceive the courts to be inefficient in settling disputes. Business should be aware and remain alert as the CPI is high.
Unfortunately, for some businesses, there is very little support from the government.
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Economic-Infrastructural Environment
Economic Measures
Minimum wage: set by the commission 2500 GTQ/Month ($322.50 approximately)
Working hours: the ordinary workday cannot exceed 8 hours.
Guatemala currency: Quetzales
| Rate | Type | Which goods or services |
| 12% | Standard | All other taxable goods and services, including imports |
| 5% | Reduced | Flat rate for small businesses |
| 0% | Zero | Exports |
| 0% | Exempt | Education; Resales of real estate; basic foodstuffs; limited range of financial services and insurance |
Sales Tax
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Economic-Infrastructural Environment
The standard VAT rate in Guatemala is 12%. Guatemalan taxpayers must produce invoices for all taxable transactions, including exports. These must be government-approved invoices which are processed through the Facturación Electrónica (termed ‘FACE’) system.
Trade Policies
The US agricultural and food products face import issues when agricultural trading with Guatemala
These issues include 1) Customs regulations; 2) Sanitary and phytosanitary certifications; 3) Product fortification requirements, and 4) Product samples.
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Economic-Infrastructural Environment: Observation Deck
Business Observations
It seems that Guatemala has a low minimum wage. However, employment laws are progressive for the region. Perhaps bringing new business could help the economy and improve wages for employees.
Government intervention in international trade has a negative impact on businesses. According to the 2020 world bank doing business survey, Guatemala rank 99 for starting a business, which is not high but still manageable.
There are some import issues like customs regulations that result in higher tariff rates. Sanitary requirements that need to be met with proper inspection and certifications.
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Economic-Infrastructure Environment
| Interest Rates | 1.75% |
| Unemployment (Central Intelligence Agency, 2021) | 2.3 % (2017) |
| Inflation (Central Intelligence Agency, 2021) | 3.7% (2019 est.) |
| GDP real growth rate (Central Intelligence Agency) | 2.8 (2017 est.) |
| Exchange Rates (Central Intelligence Agency, 2021) | quetzales (GTQ) per US dollar – 7.323 (2017est.) |
| Exchange Rate regime (International Trade Centre, 2021) | Floating |
| GDP (Central Intelligence) | 1.41 billion (2020) |
| Labor Force (Central intelligence Agency, 2021) | 6.664 million (2017 est.) |
| Major Industries (Central Intelligence Agency, 2021) | textiles, furniture, petroleum, sugar, flowers, fruits and vegetables, processed foods, and chemicals. Some of the most widely grown agricultural crops in )Guatemala include: coffee, bananas, nutmeg, and cane sugar. |
| FDI Rates (International Trade Centre, 2021) | 1,169.33 thousands (in-flow as of 2019) |
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Economic-Infrastructure Environment
| Major Airports/Seaports | Aeropuerto Internacional La Aurora de la ciudad de Guatemala Puerto Quetzal, Santo Tomas de Castilla |
| Railway Stations (Government websites) | note: despite the existence of a railway network, all rail service was suspended in 2007, and no passenger or freight train currently runs in the country (2018) |
| Internet Users (Central Intelligence Agency, 2021) | 10,777,827 |
| Mobile Providers (expat.com) | Claro, Movistar, Tigo |
| Logistics Performance Index Rating (The World Bank, 2021) | Rank: 125 Score: 2.41 |
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Economic-Infrastructure Environment Observation Deck
Business Observation
Unemployment and inflation are high compared to the United States. However, foreign business still feels motivated to do business.
Market conditions in Guatemala are stable, and that’s how the exchange rate moves.
Guatemala has one major airport and several port cities that can be useful for shipping and distribution, but not railways available, making distribution to other areas a bit difficult.
A customs union within Guatemala, Honduras, and El Salvador is a practical system to transport merchandise.
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Economic Integration
Major Trading Partners
Exports: United States, Mexico, El Salvador, Honduras, European union.
Imports: United States, China, Mexico, European Union, El Salvador
Cultural Awareness
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Economic Integration
Major Exports:
Bananas, raw sugar, coffee, cardamom, palm oil
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Exports
Agricultural products Manufactures Fuels and mining products Other 50.5 44.2 5.3 0.1
Economic Integration
Major Imports:
Refined petroleum, broadcasting equipment, packaged medicines, cars, delivery trucks.
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Exports
Imports
Agricultural products Fuels and mining products Manufactures 16.3 17.899999999999999 0.4
Final Recommendations
Market Entry Strategies
The company could take advantage of Guatemalan’s location and neighbor countries. Arriving on time and socializing before talking business are some of the excellent business etiquettes that could be helpful when starting negotiations. The interest rate at 1.75% could benefit all other taxable goods and services, including imports, at 12%. A monthly income of $322.50 is affordable labor and creating more jobs could help the high number of unemployed people go down. Agriculture products are one of the highest exports of Guatemala, telling us about the region’s good weather.
Cultural Awareness:
Guatemala is made of a society in which power is predominantly held by men. Language could be a barrier. Corruption and the way extensive rules are created but not follow could be an issue that needs to be reconsider.
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References
Central Intelligence Agency. (2021). The World Factbook: Guatemala. https://www.cia.gov/the-world-factbook/
Corruption by country/Guatemala. (2021). Transparency International. https://www.transparency.org/en/
Cultural crossing guide. (2017). Culture Crossing Guide. https://guide.culturecrossing.net/basics_business_student_details.php?Id=22&CID=87
Guatemala corruption report. (2020, August). Risk and Compliance Portal. https://www.ganintegrity.com/portal/country-profiles/guatemala/
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References
Guatemala - Country Commercial Guide. (2021, August). International Trade Administration. https://www.trade.gov/country-commercial-guides/guatemala-market-overview
Guatemalan VAT rates and VAT compliance. (2021). Avalara. https://www.avalara.com/vatlive/en/country-guides/south-america/guatemala/guatemalan-vat-rates-and-vatcompliance.html#:~:text=The%20standard%20VAT%20rate%20in%20Guatemala%20is%2012%25.,
Guatemala - Market Opportunities. (2019). Export.Gov. https://www.export.gov/apex/article2?id=Guatemala-Market-Opportunities
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References
Hofstede, G. (2015). Guatemala - Geert Hofstede. Geert-hofstede.com. Retrieved from Country Comparison - Hofstede Insights (hofstede-insights.com)
INTERNATIONAL LPI. (n.d.). The World Bank. Retrieved 2015, from https://lpi.worldbank.org/international/global
Phones and internet in Guatemala. (2017). Expat.Com. https://www.expat.com/en/guide/central-america/guatemala/15499-phones-and-internet-in-guatemala.html#:~:text=Several%20mobile%20service%20providers%20compete%20on%20the%20Guatemalan,international%20firm%20Telefonica%29%203%20Tigo%20%28within%20Millicom%20Group%29
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